What Are Minimum Taxes, and Why Might One Favor or Disfavor Them?

Abstract

Minimum taxes (including global minimum taxes) have serious drawbacks, and generally make sense, if at all, only if otherwise superior options must be ruled out for reasons of optics or political economy. Yet, given the “compared to what?” question that haunts all real-world tax policy-making, one cannot reasonably say that they should never be used. Still, any such use should generally be contingent, reluctant, and based on understanding their structural deficiencies.

Keywords: Minimum Taxes, Taxable Income, Financial Statement Income, Foreign Tax Credits, GloBE Pillar 2, Tax Reform

JEL Classification: H20, H24, H25, H26